Question

You are the auditor for Johnson Products, a medical supply company. They ship wholesale products to clinics and hospitals and some retail products to drug stores.
When flowcharting the revenue cycle, you discover the following information:
All sales are made on open account via 1/10, net/30 credit terms, unless arrangements are OK’d by credit manager approval. Credit terms were last evaluated 10 years ago.
Inventory is maintained in real-time via computer.
Official prices can be updated as needed by product managers or the sales vice president.
Regional managers can override official prices if the computer queries deviations.
New customers require credit approval by the regional sales manager.
Once a line of credit is established, a monthly credit report is generated to compare customer credit lines with instances where credit has been exceeded. In those cases, a halt is placed on further sales.

Required:
What are the internal control weaknesses you identify? What problems could this create and what suggestions would you make to correct them?



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  • CreatedJanuary 21, 2015
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